H&M's Supply Chain Management Practices

H&M has a formula; it's based on the recognition that retailing is essentially theater. There's a stage and it must change continuously to hold the interest of the consumer." - Kurt Barnard, President of Barnard's Retail Consulting Group, in 2007. "A short lead time is not an end in itself, since it is always a matter of getting the right balance between price, time and quality." - H&M Annual Report, 2006. Introduction In late 2002, one of the buyers from Sweden-based apparel retailer Hennes & Mauritz AB (H&M) on a trip to South Asia, chanced upon a college student wearing a peasant blouse and gypsy skirt. The dress caught the buyer's fancy and she immediately took photographs of it and sent them to the company's design team at Stockholm, which was working on new concepts and styles for the coming season. The designers approved the new concept, decided on the fabric and colors, and orders were placed with a supplier in India to make the garments available in time for the spring-summer collection. The dresses were on the shelves of some of H&M stores across the world by February 2003 and were lapped up by customers in quick time. The company was able to meet the growing demand for the dresses on time by replenishing the stocks within three weeks. Heeding customers' demands, H&M went on to embellish the peasant blouse with sequins and lace, and brought out skirts in new colors. Seeing that the dresses were really popular, H&M also introduced them in several other markets. H&M was among the pioneers in fast fashion, and apart from introducing its own styles, it also scouted around the world for styles and fashion that could click among customers. The clothes from H&M were reasonably priced, stocks were replenished every day, and no item remained on the shelves for more than a month. Customers therefore made it a point to repeatedly shop at H&M. The secret of H&M's success was a well-integrated supply chain - the clothes designed by the headquarters at Stockholm were made by more than 600 suppliers located in 22 countries in Europe and Asia. After the garments were manufactured, they were shipped to stores across the world. H&M decided on the suppliers depending on the lead time. The products with higher lead times were made in Asia, and those that were in high demand were made in Europe. All the products were distributed across the world to its 1,345 stores, located in prominent shopping districts in 25 countries across the world. According to Florence Mller, Professor, French Fashion Institute,

"H&M has gone from being a distributor to being a fashion label. H&M stores and those of its competitors have a much larger role than you might think, they've become places for fashion followers where one goes to see confirmation of the trends for the season."3 H&M was founded by Erling Persson (Persson), a salesman from Vsters , Sweden. In 1947, on a visit to the US, Persson was attracted by the concept of clothes stores selling stylish garments at low prices. Following a similar concept, he opened a store selling clothes for women in Vsters in 1947, and named the store 'Hennes' (hers in Swedish). The low prices immediately attracted customers. The stores were expanded during the 1950s and the 1960s. Persson was confident that the concept would work as well in other countries, and in 1964, the company ventured overseas by opening a store in Norway. This was followed by a store in Denmark in 1967... Idea Generation and Design Initially, H&M sourced the products mostly from its agents in Asian countries and sold them through its stores. In the late 1980s, after Bosch joined the company, H&M began building a design team to take to the stores the products that customers were demanding... Production Initially, all the production activities of H&M took place in Sweden. In the 1960s, production was carried out in other Scandinavian countries and in the UK. In the late 1960s, some of the production activities were shifted to southern European countries like Italy and Portugal. By the early 1970s, H&M was also producing in Hungary, Poland, and erstwhile Yugoslavia. In 1978, H&M ventured into the Far Eastern countries with a production office in Hong Kong. As of 2000, H&M had 21 production offices, of which 10 were in Europe, 10 in the Far East, and one in Africa... Distribution A large part of the finished products that were manufactured were shipped using external contract companies to the central warehouse in Hamburg, Germany, which served as the transit terminal. Logistics was managed centrally from the company's headquarters in Stockholm. Most of the goods from the production centers across the world passed through this transit terminal on their way to the destination country. The transit terminal received the goods from all the suppliers across the world... Store Management Before opening new stores or before entering a new market, H&M conducted extensive research on the demographics of the consumers, spending power, competition, and other factors that could contribute to the success of the international venture...